How to Trade the Upcoming Jobs Report

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It's one tough job market out there. Here's how to use currencies to play the nonfarm payroll report.

The nonfarm payroll report always gets investors excited, and the report coming October 7 is no different. Michelle Meyer, an economist at Bank of America Merrill Lynch, expects 75,000 in nonfarm payrolls, but told CNBC's Melissa Leeshe thinks the risk is to the downside.

Andrew Busch, global currency and public policy strategist for BMO Capital, doesn't have such a precise forecast, but he has a playbook for the report. If the market is expecting something on the order of 50,000 in nonfarm payrolls, he says, an actual figure over 70,000 would lead him to sell the dollar and buy the Canadian dollar. If they run between 70,000 and 30,000, he would do nothing. If payrolls come in under 30,000, he would buy the dollar and sell the Swedish krona.

Busch's most likely scenario is for a payroll number above 70,000. So he recommends selling the dollar against the Canadian dollar at 1.040 with a stop just above the recent high, at 1.047, and a target of 1.0155.

Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional, likes the trade. But she points out that there will be other data to watch the same day that could complicate the mix: Canada will report nonfarm payrolls and a PMI survey.

Stay tuned.

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

Learn more: The essential vocabulary for currency trading is on Key Currency Terms. Top currency strategies are broken down for you in Currency Class.

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